More lessons from million-dollar accounting partners
After years of long hours and struggle, research shows that only a tiny fraction of the CPAs who rise to the level of partner will consistently earn $1 million a year (see Lessons from million-dollar accounting partners). What makes them different from the rest of the profession? Do they have superhuman stamina, exceptional intelligence or superb technical competence? Not necessarily.
An AES Nation study of nearly 400 accounting partners consistently making $1 million or more shows the several obvious and not so obvious traits in common. Here are the first three:
1.They are client-centric. They put the needs and wants of their clients above their own.
2. They really want to become wealthy. Almost all millionaire CPAs (96 percent) have set a specific goal of becoming wealthier. Doesn’t everyone? Actually, research shows only four out of five CPAs earning $500,000 a year aspire to be much wealthier, and the ratio goes down as you move lower on the income scale.
3. They have a product-neutral mindset, not a product-inclusive mindset. While no. 1 and no. 2 above seem obvious, no. 3 is not so obvious. “Product neutral” refers to the delivery of services and products that tend to be administrative in nature, with hourly billing as the foundation.
“Product inclusive” is very similar to the wealth management model which includes investment management and insurance. Product inclusive is very transparent and fees are disclosed upfront. For the millionaire CPA producers, the profit margin on product-inclusive services is much higher than it is for product neutral services. The profit margin on product neutral ranges from 40 to 65 percent. Not bad, but compare that to the profit margin on product inclusive, ranging from 50 to 80 percent. Simple math tells us that the product-inclusive business model makes it much easier for you to reach that $1 million net income level. But, AES research shows that only one out of five (21 percent) of millionaire CPAs are product inclusive. That’s just one of the important reasons why they are in rare company.
4. They’re willing to get out of their comfort zones. Are top CPA producers the rainmakers at their firms? In many cases they are, but it’s not because they are naturally better schmoozers and salespeople. What they are willing to do more of than other CPAs is to get outside of their comfort zones. That’s why they are more likely than lower-earning CPAs to give speeches, write for publications, grant interviews to the press and serve on boards, among other outward-facing activities. In other words, they are willing to do the things that make them uncomfortable.
Here’s where it gets very interesting. If you force yourself to get a little uncomfortable in your life, then your comfort zone will get larger. But the inverse is true if you just stay in your comfort zone and don’t push yourself to get outside of it. Your comfort zone will actually get smaller.
5. They’re very intentional about becoming thought leaders. If you look at those elite CPAs making over $1 million a year, they’re doing the following:
- Positioning themselves as thought leaders.
- Taking the time to study framing and how to communicate the value of what they deliver to clients. More on this in a minute.
- Employ the highest-caliber people they can.
- Laser-focused on who they’re working with (i.e., successful business owners).
I can assure you that most elite CPAs are uncomfortable at first doing things like those mentioned above. But, as they keep doing those activities, the get better and more confident at them, so their comfort zone naturally expands.
People throw around the term “thought leader” pretty liberally these days, but what does it really mean? If you’re truly a thought leader for the CPA community, then your prospective clients, your current clients, your competitors and industry watchers recognize you as the “go-to” person in your niche. When you are truly a thought leader based on our definition above, then you are able to profit greatly from that positioning.
According to AES Nation research, almost all millionaire CPAs (96 percent) are actively working toward being a thought leader. Not surprising, but compare that to just three in ten (29 percent) lower-earning CPAs, including those making six figures.
6. They put themselves in the “line of money.” In other words, they focus on serving wealthier clients that will require more products and services — privately held companies, professional practices or other types of partnerships. Not surprisingly, nine out of 10 special business owners say their CPA is their go-to professional; their most trusted advisor. AES Nation research shows that 91 percent of millionaire CPAs say special business owners are their ideal clients. By contrast less than two-thirds (63 percent) of lower-earning CPAs say special business owners are their ideal clients.
7. They communicate and frame well. When I was a young associate at a Big Four firm in Chicago, I looked at the partners above me. The one who was consistently the highest producer had the ability to make even the most complex things we were working on easy to understand for us and for our clients. Trust me, that’s not something that comes naturally to most people, regardless of your profession, but framing and communicating well will increase your profit margin and make you much more “referable.”
Warren Buffet is a classic example of a master communicator who can take complex financial topics and explain them in simple enough terms for a fifth grader to understand. Everything is a story. Everything is an analogy. When you communicate that way, it resonates and creates permanence in people’s brains. That’s brilliant!
8. They’re laser-focused on their most profitable clients. Everybody is busy. Everybody is overloaded. It’s not as if these high-powered CPAs have extra time on their hands that frees them up to go prospecting. They’ve made a deliberate decision to drive profitability and that often means working with wealthy business owners.
Let’s say I’m a successful business owner. If you can communicate your value succinctly and tell me what you’re going to deliver to me and what it’s going to mean for my business and my family, then I’ll pay a premium for that kind of advice. I’ll also pay a project-based fee for additional high-margin services. I don’t need to know how long it will take you to fix the problem or what your hourly rate is. I just need the problem solved ASAP and I don’t want to feel like the meter is running every time I talk to you.
9. They have an adaptable infrastructure, operations and high caliber people. Whether relying on in-house staff, outsourcing or joint ventures, their firms have the ability to pivot and adjust quickly to changing conditions and maximize leverage on their existing resources. This is where small to midsize firms actually have an advantage over larger firms. When you combine great people with an adaptable infrastructure, you can free up your bandwidth to pursue the high margin activities with the best types of clients. Millionaire CPAs are very good at understanding their constraints and limitations.
10. They develop joint ventures with other trusted advisors such as attorneys and wealth advisors. My experience working closely with CPA firms has demonstrated firsthand the enormous power of joint venturing and strategic partnering. It greatly increases the revenue of the accounting partner and amplifies the value for the client.
By the way, millionaire CPAs can be found at all size firms, not just at the global behemoths. They know what to focus on. They can explain things simply. They can frame their value proposition succinctly and transparently. They hire great people around them. They have an adaptable infrastructure and operation, and they’re constantly pushing themselves outside their comfort zones. More easily said than done, but chances are you already have several of the 10 attributes outlined above. Build on your strengths and then shore up the others. I can’t guarantee you’ll hit the seven-figure mark, but you’ll certainly be on your way to the next level.